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2016-03-18

The FOMC dares not tighten despite core inflation reaching 2.3pc because it is so worried about financial markets. Ambrose.

Interest rates in the United States have fallen to minus 2pc in real terms and are dropping into deeper negative territory with each passing month. 

This is a remarkable state of affairs.

It is clear that the US Federal Reserve is now trapped. 

The FOMC dares not tighten despite core inflation reaching 2.3pc because it is so worried about tantrums in financial markets and about that other Sword of Damocles - some $11 trillion of offshore debt denominated in dollars, up from $2 trillion in 2000.

The Fed has been forced by circumstances to act as the world's central bank, nursing a fragile and treacherous financial system struggling with unprecedented leverage.

Ambrose Evans-Pritchard 17 MARCH 2016 

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